Back in February, former currency speculator John Key and former Treasury adviser Bill English started talking about suspending contributions to the Cullen Fund, which was set up to help fund superannuation. ‘It’s losing so much money’, they wailed.
Some people pointed out that the markets were already recovering, that investments could now be bought at once in a generation low prices. But we were ignored.
Unfortunately, and in spite of Treasury papers being leaked that showed it would cost the country $8 billion by 2023, Key and English went ahead and essentially cancelled the contributions to the Cullen Fund from July 1.
So far that decision has cost us $21 million. That’s the return on investment above the cost of borrowing we would have made in just three months if the contributions had continued, based on the Cullen Fund’s performance. Since March, the Cullen Fund has earned 23.5% returns against the borrowing cost of 1.6% during the same time.
3 months, $21 million down the drain. The cost of that mistake will keep on compounding and compounding. Soon it will be in the billions. Even when contributions are eventually restarted, the Fund’s value will never get to the heights it would have. This decision by a former currency speculator and a former Treasury adviser could become the most expensive financial mistake in New Zealand history
And the cost of their folly will come out of your superannuation.